IGI Logo

OIL reported a 9% beat in Q2FY24 S/A adj. EBITDA at Rs26.3bn, led by 4% revenue beat on higher sales to production ratio and lower opex, while APAT stood at Rs20.2bn, a 16% beat accentuated by higher other income. RPAT, however, slumped to Rs3.3bn due to a one-time provision of Rs23.6bn for GST on royalty, similar to ONGC (in Q4FY23). Crude production was in-line at 0.83mmt (up 6% YoY), while gas was 3% beat at 0.81bcm (down 2% YoY). NRL’s operations resumed post the shutdown; with more than 100% utilization and basic GRM up to USD16.0/bbl in Q2, earnings recovered to Rs7.4bn. Mgmt. cited crude production target at 3.5-3.6mmtpa for FY24, while gas could see 2- 3% YoY growth. We raise our consol. adj. EPS for FY24/25E by 13%/7% to build-in lower opex and H1FY24 runrate. We hike our Sep-24 TP by 12% to Rs370 on roll-over and lower opex going ahead. We retain our BUY rating.

Oil India: Financial Snapshot (Consolidated)

Result Highlights

Result Highlights OIL’s crude sales-to-production ratio jumped to 102% from 91% QoQ, while gas was also up to 80% from 73%. Crude realization for Q2FY24 stood at USD86.9/bbl. Gas realization was steady QoQ at ~USD7.0/mmbtu. Employee costs rose 5% YoY/9% QoQ to Rs4.9bn, while other expenses increased 1% YoY/48% QoQ to Rs8.3bn (13% below estimates). DD&A was flat YoY but up 7% QoQ to Rs4.2bn. Interest costs rose 35% QoQ to Rs2.2bn (vs. Rs1.7bn estimated by us). Total statutory levies were 12% higher than estimates on account of inventory-related and other adjustment in windfall levy. NRL reported 1% YoY growth in EBITDA to Rs10.8bn, with volume at 0.78mmt (up 1% YoY). The share of loss from assoc./JV in consol. accounts was Rs541mn in Q2FY24 vs. Rs957mn profit in Q1. Consol. adj. EPS for Q2 was up 18% YoY/56% QoQ at Rs20.6/share. The board has recommended an interim dividend of Rs3.5/share.

Management KTAs

OIL accounted for GST provision on royalty on account of prudence and conservatism, while the Gauhati HC hearing has also been deferred. The recurring run-rate of this provision is Rs5bn p.a. Gas production fell in H1 due to lower customer offtake. Mgmt. refrained from giving guidance beyond FY24 but intends production CAGR of 4-5% for the next 2-3 years. NRL’s recent rights issue covers the entire equity infusion requirement from OIL for the expansion project. OIL may have declared a higher interim dividend, if GST on royalty provision was not made in Q2; while a higher second interim dividend might be possible. Out of OIL’s total consol. capex plan of more than Rs130bn for FY24E, Rs49bn would be on standalone and Rs87bn towards NRL. Out of the total NRL expansion capex of Rs280bn, Rs130bn has been spent till Sep-23 end and the balance will be incurred by FY25-end. Russian dividends stuck are ~USD450mn as of now. OIL’s consol. debt was Rs200bn as of Sep-23 end, split between OIL SAECB/Singapore subsidiary/NRL as Rs110/40/56.5bn.

Valuation

We value OIL on an SOTP basis, comprising S/A (using DCF) and NRL (DDM). Investments are valued at our TP or CMP, with a 30% holdco discount. Key risks: Adverse oil and gas prices, policy issues, local tensions, cost overruns, outages, & dry holes.

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf &

SEBI Registration number is INH000000354